Commenting on President Sarkozy’s plans to introduce a Tobin Tax in France, Prof Philip Booth, Editorial Director at the Institute of Economic Affairs, said:
“By introducing a transactions tax, President Sarkozy hopes to make the financial sector pay for the damage caused by the crisis and repair the hole in French government finances. He will achieve neither objective. The EU and member states are already taking action - much of which is appropriate - to ensure that, in the future, banks that make bad business decisions are wound up safely and do not impose burdens on the taxpayer.
“Transactions taxes on the other hand are arbitrary and the burden of the tax is likely to be placed on the users of financial products - those who have mortgages, need foreign exchange cover for business transactions, and so on. In fact, the likely result of a transactions tax in France is that business will move elsewhere and economic recession in France will be entrenched.
“It is, indeed, incredible that one of the world's most over-taxed and over-regulated developed economies should be imposing more taxation as part of a so-called recovery package.”
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Notes to editors
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.